KARACHI: Pakistan’s stock market recovered some of its losses on Monday as traders and investors anticipated positive outcome in the country’s impending talks with the International Monetary Fund (IMF) for the resumption of a $6 billion loan program and approval of the federal budget this week.
The country is in desperate need of external finances due to a growing current account deficit and dwindling foreign currency reserves.
The situation has also weakened the national currency, as the country’s new government took stringent economic measures that added to the inflationary pressure while trying to convince the international lending agency to resume the loan facility.
Pakistan’s economy is still not out of the woods, though its equity market gained more than 826 points on Monday, after losing over 1,600 points at the close of last week.
“Stocks showed sharp recovery ahead of the federal budget’s approval this week to resume deal for IMF bailout program,” Ahsan Mehanti, chief executive officer (CEO) of Arif Habib Corporation, told Arab News.
“Surging global equities and rupee’s recovery after reports of likely approval of Saudi deferred oil payment facility of up to $3.6 billion, $2.3 billion loan agreement with a Chinese consortium and $3.688 billion debt suspension played a catalyst role in bullish close.”
Pakistani financial analysts said the market also corrected after overreacting on Friday to the imposition of a 10 percent super tax on major Pakistani industries, including cement, steel, sugar, oil and gas, and fertilizers.
“The market had on Friday overreacted on the imposition of super tax by the prime minister that is only one-time collectable,” Samiullah Tariq, research director at Pakistan Kuwait Investment Company, told Arab News.
“There was an overreaction at the bourse in response to the imposition of super tax which has now been corrected.”
Pakistan’s currency market, however, did not show any improvement on Monday despite the recent inflow of $2.3 billion from China.
The Pakistani rupee lost its value by 0.22 percent in the interbank market as the dollar closed at Rs207.94, mainly due to persistent demand for import payments.
According to the Exchange Companies Association of Pakistan (ECAP), the greenback’s buying and selling rates respectively stood at Rs204.50 and Rs206.59 in the open market.
Pakistan is expected to resume negotiations with the IMF in the coming days, with its finance minister trying to convince the international lending agency to increase the size and duration of the loan program agreed in 2019.
